Lauder Declares He'd Phase Out The Income Tax for New York City

By DAVID E. PITT

Published: August 24, 1989

Calling New York City ''an economic basket case,'' Ronald Lauder, a contender for the Republican mayoral nomination, promised yesterday that if elected he would rescue the economy by phasing out the city's income tax.

''New York City's income tax is driving families and businesses out of the city,'' Mr. Lauder declared, standing under a blazing sun on the steps of City Hall. ''We need to strengthen our economic base. Abolishing the income tax will do just that.''

He said the financial loss would be offset easily by increased revenue from the sales tax and other municipal levies - an inevitable result, he said, of ''all the businesses and families'' that would drop plans to move from the city.

Mr. Lauder's proposal comes amid predictions by economists and others that the city will face vast budget gaps within two years without substantial new taxes. Those deficits, combined with strains on the economy created by the effects of crack, AIDS and homelessness, could make the fiscal crisis of the 70's look ''benign'' by comparison, Felix G. Rohatyn, chairman of the Municipal Assistance Corporation, said recently. 'Shot in the Arm'

Mr. Lauder said he would reduce the income tax to zero over five years. ''It would be over by the first year of my second term,'' he said.

The city expects to collect $2.2 billion in 1989 personal income tax, a figure representing 15.4 percent of all city tax revenue.

Asked about a Koch administration prediction that even without significant raises in new labor contracts, the city will face major deficits in coming years, Mr. Lauder insisted that getting rid of the income tax would be just the ''shot in the arm'' that the economy needs.

Freed of having to pay income taxes, Mr. Lauder said, ''families would have more disposable income, and the result is they'd spend more money in New York.'' That spending ''would have a great effect on the sales tax,'' he said.

Mr. Lauder, predicting that ''the liberals will brand my proposal as undoable,'' noted that the income tax was instituted in 1966 by Mayor John V. Lindsay, a Republican who won the mayoralty on a fusion ticket. Calling the former Mayor ''Mr. Liberal Party himself,'' Mr. Lauder declared, ''We don't need more liberals, and we don't need the city income tax.''

Mr. Lauder, a former Ambassador to Austria who will face Rudolph W. Giuliani in the Sept. 12 Republican primary, said he would combine elimination of the tax with a drive to reduce waste in city spending.